Underinsured After a Loss: The Role of Broker’s Negligence in Providing Sufficient Coverage
Following a catastrophic loss, many individuals find out all too late that they were severely underinsured for the loss, and sometimes, that the loss they suffered was not insured for at all. This unfortunate realization can apply to property, business, automobile, or health insurance. When the premiums we pay do not cover what we expect them to, in some cases, the fault lies with the Broker who sold us the policy.
Insurance Agent & Insurance Broker
In Ontario, there is an important distinction between an Insurance Agent and an Insurance Broker. While an Agent works for one specific insurer, representing their interests, a Broker can offer policies from multiple insurers and are part of a self-regulated, professional organization (i.e. Registered Insurance Brokers of Ontario (“RIBO”)). A Broker can act for both insurer and insured, but their primary duty is to the insured, who is often the least informed party to the insurance contract. While RIBO maintains a code of conduct for its members, Ontario Courts have expanded or clarified these obligations further.
When dealing with insureds, Brokers have positive obligations to:
Assess the risks requiring insurance;
Provide advice on what the proper coverage would be for those risks;
Advise the insured if a particular kind of coverage is not available to them in the circumstances;
Secure the appropriate coverage;
Explain, document, and evidence any exclusions in coverage; and,
If coverage is rejected by the insured or the insurer, document it in writing, and find the best available alternative, explaining shortfalls to the insured.
Brokers must also understand the nature of the insured’s needs, whether those are specific requests for contents insurance, or the nature of a complex business being insured. While Brokers must protect the insured against foreseeable, insurable risks, they are not required to be omniscient. When selling a particular insurance product, Brokers should be fully informed of all insurable risks pertaining to the same.
However, Brokers must also carefully balance their obligations to insured persons against those they owe the insurance company. When dealing with a Broker, it is important to keep in mind that they owe a duty of good faith to the insurance company, and must:
Make efforts to discover relevant information regarding the insured’s insurability and risk level;
Convey important information from the insurance company to the insured;
Uncover and convey all material information from the insured to the insurance company required for the insurance product; and,
Must not compromise the insurer’s right to deny coverage or rely on applicable exclusions and defenses.
Contact a Lawyer
The complexity of insurance contracts and the delicate balance of obligations Brokers are required to navigate can be challenging to grasp, particularly in the aftermath of a substantial loss. When multiple parties are involved, fault can be even harder to ascertain. As such, it is advisable to consult a lawyer to properly explore which parties may or may not be liable for the loss you suffered. At Singer Kwinter, we have close to 50 years of experience achieving the best outcome for our clients when dealing with insurance companies.
